...Sustained Profitability: The UK building society sector posted a robust performance for 2014, mainly driven by widening net interest margins (NIM) in large part due to decreasing funding costs. Loan impairment charges were also low, in Fitch Ratings' view unsustainably so. Strong efficiency was maintained across most of the sector. Challenges Ahead: Fitch expects profitability to be challenged by competitive pressure on mortgage rates and by likely increased funding costs following a base rate rise. However, we do not believe the pressure will be pronounced until 2016 so 2015 could, therefore, be a strongly profitable year. The agency expects to see some lenders increasing their presence in higher loan-to-value lending (85%+) or moving into more niche services in order to compensate for the tightening of spreads. Improved Balance Sheet Strength: Favourable volume growth in 2014 for mortgage loans was supported by improved balance sheet strength in the sector as well as strong contingency...
